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The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Economic Outlook for California Construction
Lynn Reaser, Ph.D.Chief Economist
Point Loma Nazarene University
March 11, 2010
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Fermanian Business & Economic Institute
Who We Are� Affiliated with Fermanian Business School in San
Diego, California� Point Loma Nazarene University founded in 1902� Institute conducts economic analysis, modeling, and
forecasting� Focuses on actionable conclusions for companies,
non-profit organizations, and government agencies� Staffed by ten professionals and assistants � Core values are quality, objectivity, and integrity
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
California Construction Economy Topics
�Perspectives on the last 15 years
�Current situation
�Outlook through 2015
�Conclusions
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
California ConstructionThe Last 15 Years
�Expansion 1994-2005
�Devastating decline during past four years
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Construction Spending Rises, then Falls SharplyBillions of Constant (2009) Dollars
2009
Sources: Construction Industry Research Board; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Housing’s Share of Construction Spending ShrinksPercent
Sources: Construction Industry Research Board; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
California’s Construction GSP Expands, then Contracts
Billions of Constant (2009) Dollars
e=estimate Sources: Construction Industry Research Board; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
California ConstructionCurrent Situation
� 364,000 jobs lost in four years
�All segments down sharply
�Housing bottoming; nonresidential still dropping; public building weak
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
California Suffers Severe Construction Job LossThousands of Jobs
Sources: Haver Analytics; California Employment Development Department; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
All Major Building Segments Post Steep Spending Drops
Percent Change from Prior Peaks to 2009
Sources: Haver Analytics; California Employment Development Department; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
�Housing: Upturn, but constrained--overhang of foreclosed homes and limited finance
�Nonresidential: Recovery delayed until 2012—cyclical lags and refinancing problems
�Public: Relatively flat—fiscal pressures on federal, state, and local governments
California ConstructionOutlook
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Total Construction Spending Recovers, but Only to Two-Thirds 2002-06 Level
Billions of Constant (2009) Dollars
f=forecast
Actual Forecast
Sources: Construction Industry Research Board; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Construction Spending Segments Move Higher, but All Below 2002-06 LevelsBillions of Constant (2009) Dollars
Nonresidential
f=forecast
Actual Forecast
Sources: Construction Industry Research Board; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
California’s Construction GSP in 2015 Still Off 30% from 2005 Peak
Billions of Constant (2009) Dollars
f=forecast
Actual Forecast
Sources: Haver Analytics; PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Construction 2015 Employment Down 250,000 Jobs from 2005 Peak
Thousands
f=forecast
Actual Forecast
Sources: Haver Analytics; California Employment Development Department;
PLNU
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
Recap—California’s Construction Industry
�Massive swings during past 15 years
�All segments are down sharply�Housing will lead the recovery
�By 2015, Industry still a shadow of its 2002-06 levels
The Fermanian Business & Economic Institute – business & economics in action in action in action in action © FBEI 2010
�The Goal: Achieve air quality standards and restore a healthy economy
�Side Effect of a Weakened Economy: Less air pollution
�Delaying Rule until 2015 would:--Give firms needed breathing room
--Enable investments in new generation of equipment available by 2015
Conclusions/Recommendations
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